If you’re looking to buy an apartment, you’ve likely considered purchasing off the plan. New apartments offer buyers a range of financial benefits, flexibility and a choice of stock that existing apartments simply can’t – and all of these are usually front of mind when signing on the dotted line. What a lot of people forget to consider is the type of strata scheme or owners corporation they’re buying into, and the impact it will have on their way of life. Here’s what you need to know before you buy off the plan.
What is strata?
If you’re new to apartment living, you may not know much or anything at all about strata or owners corporations. The terms essentially describe how shared buildings are split up: individuals own part of the property (an apartment or lot), and take shared ownership of the remainder of the property, which can include foyers, hallways, outdoor spaces, driveways, external walls, and even the roof. That means shared responsibilities, shared rules, and shared expenses.
In multiple-ownership dwellings, the owners collectively make operational and financial decisions, and create rules that apply to everyone who steps foot on the property. When you buy off the plan, however, a representative body for the owners (called an owners corporation or body corporate) hasn’t been formed yet, and so all decisions are made by the developer.
Before you delve into buying a property off the plan, it’s important that you first understand the lifestyle on offer, as this will attract a certain type of buyer or occupier, and will in turn affect the types of rules or by-laws, and how much outlay will be expected to keep the property in working order.
If the property you’re looking at is being marketed as high-end living with a bargain price tag, you may not pay much upfront, but your ongoing fees or levies may be higher, simply to keep the property functioning and looking its best – especially if the property boasts ‘resort living’ and includes features such as a shared pool, bathrooms, shared rooftop entertaining and elaborate gardens. As the saying goes, you get what you pay for, but you also need to pay for what you get.
The calibre of buyers can often determine the standard of living, too, and therefore the expectation and quality of maintenance, as well as the types of rules in place.
The proposed by-laws or rules
The developer will have set out proposed by-laws and rules, which all owners and occupants will need to abide by. Some of these will not only affect how you use common property, but how you use your individual apartment or lot, too. Some common by-laws and rules apply to smoking, animals, and the use of your apartment as an office space or short-term let. There may also be some proposed restrictions on the use of some facilities such as courtyards or rooftops.
You can ask to change by-laws or rules that you think should not apply, but the final say is at the discretion of the developer. In most cases, it’s best to ensure you’re okay with the by-laws or rules that are proposed.
The proposed levies or fees
One of the most crucial points to consider when buying off the plan is the proposed levies, which will cover the cost of electricity, insurance, maintenance and repairs. Aside from factoring this ongoing expense into your budget, it’s worthwhile comparing the levies to other similar properties.
In most cases, if the fees seem too good to be true, they probably are. Low fees are highly desirable, but they can sometimes be the result of an overly eager sales team or bad budgeting. A good strata scheme or owners corporation should have a comfortable maintenance fund to cover replacements and upgrades, otherwise owners may get slugged with a ‘special levy’ at a later date. It’s also worth asking if the levies or fees are expected to increase by the time building is completed, and by how much.
For more things to think about before buying an off the plan apartment check out the pros and cons of compact apartment living, what ongoing expenses are involved in property investment and common property investment traps and how to avoid them.